Cairn India to start drilling for oil in Sri Lanka in August

Reuters: Cairn India, majority held by Cairn Energy, will start drilling for oil in Sri Lanka’s northwestern Mannar basin in August, though commercial production would be at least six years off if it finds any.

Sri Lanka has awarded one of eight blocks to Cairn Lanka, a subsidiary of Cairn India, with an area of 3,000 sq km.

“We will drill three wells. In four months after drilling, we will be able to say if there is oil and gas in the basin and it will take another two years to assess how much oil and gas are there, if any. Altogether, if there is oil, it will take a minimum of six years to start commercial production,” Stuart Burley, the head of geoscience at Cairn India, told Reuters in Colombo.

Sri Lanka gave one block each to India and China in 2007, but neither of the Asian giants responded positively. Sri Lanka has planned to award other blocks as well by tender.

American and Russian companies from the mid-1960s to 1984 undertook exploration work in the Cauvery basin, but no commercial oil was produced and Sri Lanka’s civil war ended exploration.

With the end of the 25-year war in May 2009, the $50 billion economy has focused on oil and gas exploration in its economic revival plans.  Calgary-based Bengal Energy Ltd. has exploration rights for 1,362 sq. km. on the Indian side of the Cauvery basin, which already has nearly 30 operating wells.

Sri Lanka’s Government has said previous seismic data showed potential for more than one billion barrels of oil under the sea in a 30,000 sq. km. area of the Mannar Basin, located further south along the western coast.

Sri Lanka produces no oil and is totally dependent on imports, which cost it $3 billion in 2009.